TUI navigates market turbulence, reporting resilient results

Shares dipped 2% following dividend cut but rose again after results beat expectations

Article updated: 11 December 2019 2:00pm Author: Helal Miah

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  • 2019 interim dividend was cut to 54 euro cents from 72 euro cents, announced ahead of results causing shares to head south by just over 2%
  • However, when reviewed the results look pleasing reversing the 2% fall to a 2% rise with the overall numbers beating expectations
  • Revenues rose by 2.5% to €18.93bn while the underlying EBITDA came in at €893mn, again beating market expectations
  • Thomas Cook collapse was ultimately too late to have a serious impact on these results but this will not doubt work in their favour for the upcoming year
  • Recommendation: we remain cautious on the sector and maintain our cautious ‘Hold’ recommendation for the stock

TUI seemed to get the bad news out of the way first this morning as it confirmed ahead of the results publication that its dividend policy will be adjusted to boost future investment. The 2019 interim dividend was cut to 54 euro cents from the previous 72 euro cents, causing the shares to head south by just over 2%. However, the actual contents of the results release for the 12 months to September looks pleasing to the market, reversing the 2% fall to a 2% rise, with the overall numbers beating expectations. Revenues rose by 2.5% to eur 18.93b, while the underlying EBITDA came in at eur 893m, down 24% on the previous year but beating the market’s estimates. The near 24% decline in the figure is largely accounted for by the delays in approval of the Boeing 737 Max planes following two fatal crashes, but, stripping this out, underlying EBITDA rose by a fraction.

In a challenging market the group described their performance as resilient, helped by being somewhat diversified. Its Holiday Experiences arm is doing well and offsetting the challenging market conditions in the Markets & Airlines sector where management blamed Brexit, the airlines sector’s overcapacity and the 737 Max issues. The Thomas Cook collapse was ultimately too late to have a serious impact on this set of results but this will no doubt work in their favour for the upcoming year. It’s benefitted them since then and management have taken an upbeat tone for the upcoming year as bookings for winter holidays are up by 4%, with plans to increase capacity for both winter and the summer seasons.

It’s not just Brexit that’s clouding the outlook for the group, but also the increasing softer economic environment in parts of Europe, especially Germany for which investors should be cautious about. While we remain cautious on the sector given the political and economic backdrop, and maintain our cautious ‘Hold’ rating, we feel that management should be congratulated for doing a reasonably good job in steering the business through so many obstacles.

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Helal Miah

Investment Research Analyst

After graduating with an economics degree from University College London, Helal started his career within private banking at Smith & Williamson Investment Management and later held analyst and fund manager roles with the Industrial Bank of Japan, Schroders and Mitsubishi Corporation. He is a chartered fellow of the Chartered Institute for Securities & Investment. 

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